CJEU rules on vertical direct effect of InfoSoc Directive and allows national courts to disapply incorrect national transpositions

IPKat-approved vertical direct effect

As students of EU law know, a key principle – which the now Court of Justice of the European Union (CJEU) recognized for the first time in the landmark 1963 judgment in Van Gend en Loos – is that of direct effect of EU law.

Insofar as EU directives are concerned, they do not produce any horizontal direct effect. This means that they cannot be relied upon in private-party proceedings and do not impose obligations on individuals. Nevertheless, EU directives may produce – at certain conditions – a vertical direct effect. In cases in which EU law imposes upon Member States “the obligation to pursue a particular course of conduct, the useful effect of such an act would be weakened if individuals were prevented from relying on it before their national courts and if the latter were prevented from taking it into consideration as an element of [EU] law.” (van Duyn)

All this means that, when a provision in a EU directive imposes on EU Member States, in unequivocal terms, well-defined obligations as to the result to be achieved that is not coupled with any condition regarding application of the rule laid down in them, then that provision may be directly relied upon before the courts of a Member State that has failed to implement it correctly or even altogether.

But how does vertical direct effect play out in the IP context, especially in a field – that of copyright – in which Member States’ laws have been harmonized mostly through directives?

A few years ago, questions of direct effect were specifically tackled in a copyright context in OSA [IPKat here]. That referral for a preliminary ruling from the Czech Republic asked the CJEU, among other things, whether Article 3(1) of the InfoSoc Directive is unconditional enough and sufficiently precise for a certain individual or organization (a copyright collecting society in that case) to rely on in a dispute between individuals before a national court in case of incorrect transposition of that directive by a certain EU Member State.

The CJEU answered in the negative due the already mentioned lack of direct horizontal effect of directives. It is true that a national court, when hearing a case between individuals, is required, when applying the provisions of domestic law, to consider the whole body of rules of national law and to interpret them, so far as possible, in the light of the wording and purpose of the directive in order to achieve an outcome consistent with the objective pursued by the directive (Marleasing principle). However, this cannot serve as the basis for an interpretation of national law contra legem.

Let’s see how the CJEU reasoned and what the broader implications of this potentially ground-breaking judgment are.

The referral was made by the Ghent Business Court (Belgium) in 2023 in the context of a dispute between collecting society Reprobel and Copaco (a distributor of IT products for businesses and consumers), also resulting from diverging interpretations of the 2015 CJEU judgment in Reprobel, C-572/13 [IPKat here] and the changes to Belgian law that resulted from it. Incidentally, at the EU level, the earlier Reprobel ruling also prompted the introduction of Article 16 of the DSM Directive.

The Ghent court considered that the Belgian law on reprography and private copying pre-dating the 2015 Reprobel judgment was contrary to EU law and wondered whether Article 5(2)(a)-(b) of the InfoSoc Directive could have produced vertical direct effect prior to the changes to national law. According to Copaco, in fact, Reprobel could be regarded as a State entity given its mission, conferred through a Royal Decree, to collect and distribute remuneration for reprography and private copying. The result would be, still according to Copaco, the possibility of claiming against Reprobel the vertical direct effect of this part of the InfoSoc Directive.

A CJEU referral was thus made asking about (i) the qualification of an entity like Reprobel and (ii) whether Article 5(2)(a)-(b) of the InfoSoc Directive produces vertical direct effect.

Insofar as the status of Reprobel is concerned, the CJEU recalled that a vertical direct effect is produced not only against a State and its organs, but also organizations which (i) are subject to the authority or control of a public body and/or (ii) possess special powers beyond those which result from the normal rules applicable in relations between individuals. Like Advocate General (AG) Szpunar had reasoned in his Opinion, the CJEU concluded that, while Reprobel does not satisfy (i), it satisfies (ii).

Turning Article 5(2)(a)-(b), the CJEU noted that Member States enjoy some substantial discretion in respect of their transposition, but they must also comply with some key requirements, which the CJEU itself has clarified over time. Such requirements include inter alia that the level of compensation due to rightholders is linked to the harm resulting from the making of copies under either provision. In sum: Article 5(2)(a)-(b) imposes on Member States an obligation of result.

As to whether that part of Article 5 of the InfoSoc Directive produces vertical direct effect, the CJEU reasoned as follows:

• First, to produce such an effect, a provision of EU law must be (a) unconditional and (b) sufficiently precise, the latter meaning that is must set out an obligation in unequivocal terms.
• Second, the above can be the case also where a provision leaves Member States “a degree of latitude” in the national transposition.
• Third, if a provision produces vertical direct effect, then the principle of primacy of EU law results in an obligation of a national court to disapply, if necessary, “any national legislation or practice, even if adopted subsequently, which is contrary to a provision of EU law with direct effect”. Importantly: “it is not necessary for that court to request or await the prior setting aside of such national legislation or practice by legislative or other constitutional means”

Applying the guidance above to Article 5(2)(a)-(b), the CJEU concluded that these provisions do produce vertical direct effect. As a result, “in the absence of a correct transposition of that provision, an individual may rely on it for the purposes of disapplying national rules under which that individual is obliged to pay remuneration by way of fair compensation imposed in contravention of that provision.”

This is potentially a truly major copyright judgment, with implications of great relevance that could go well beyond reprography and private copying.

As noted already, the most relevant take-away is that the CJEU appears to take a (radically) different approach from the one adopted in OSA. 

In her Opinion in OSA, AG Sharpston had indicated that, first, when national courts apply domestic law, they are bound to comply with the Marleasing principle. If such an approach, however, is not possible, e.g., because it would lead to an interpretation contra legem, it is necessary to consider whether a relevant provision of a directive has direct effect and, if so, whether that direct effect may be relied on against a party to the national dispute. The AG concluded that an interpretation of national law that is inconsistent with the InfoSoc Directive would not be permissible. She did not state expressly what the legal consequences of incorrect implementations of the InfoSoc Directive would be. Nevertheless, AG Sharpston appeared to agree with OSA’s suggestion that this would be disapplication of incorrect national provisions.

Now, in light of Reprobel, this conclusion does indeed appear to be correct.

As I discuss in greater detail in Chapter 3 of Copyright and the Court of Justice of the European Union, the position advanced by AG Sharpston is appropriate if it is intended as meaning that the provision at hand is suitably clear, precise and unconditional and the disapplication by the concerned national court does not result in an additional obligation being imposed upon an individual. The latter condition serves to comply with the mandate of Article 288 TFEU and the already mentioned lack of horizontal direct effect of directives. Vice versa, an obligation to disapply a provision of national law that is contrary to a directive does arise when someone relies on that directive against a Member State, the organs of its administration, or organizations or bodies which are subject to the authority or control of the State or which a Member State requires to perform a task in the public interest and, for that purpose, possesses special powers beyond those which result from the normal rules applicable to relations between individuals.

After all, it has been clear as early as Simmenthal that – in order to comply with the principles of supremacy of EU law and sincere cooperation, as well as to ensure the full application of any provision of EU law with a direct effect – a national court called upon applying a provision of EU law that produces such an effect, is required to disapply any national rule of practice that is contrary to such a provision, where it is unable to interpret national law in compliance with the requirements of EU law and when the conditions above are satisfied. 

Of course, disapplication does not entail the automatic invalidation of the national legislation at hand. Nevertheless, as indicated by Reprobel, this means that a court should disapply the provision at hand without having to request or await the prior setting aside of that national rule or practice by legislative or other constitutional means.

First, the copyright treatment of works of applied art. Nearly 15 years after the judgment in Infopaq [IPKat here] and a consistent approach that the CJEU itself regards as “well-established case-law”, courts (including at the national level) have correctly acknowledged that “[t]he CJEU ruled that national law could not impose a requirement of aesthetic or artistic value”. 

Most recently, in Kwantum [IPKat here] both AG Szpunar and the CJEU confirmed that works of applied art can be protected upon merely fulfilling a requirement of originality, understood in accordance with EU law. The AG Opinion is adamant that neither Article 17 of the 1998 Design Directive nor Article 96(2) of the 2002 Design Regulation question this. In turn, national courts might have to disapply national provisions that require the fulfilment of requirements other than originality.

To exemplify: the Italian Copyright Act (Article 2 No 10 Law 633/1941) provides that protection of works of applied art under copyright is allowed insofar as such works display “creative character and artistic value”. Such an approach appears to be at odds with EU law (and CJEU case law). Following Reprobel, even lacking a legislative intervention that reformed the wording of the Act, an Italian court could be well entitled to disapply – in the context of a vertical direct effect situation – Article 2 No 10 and follow instead the approach mandated by the CJEU.

Second, all those (terrible) transpositions of the DSM Directive. Broadly speaking, Member States have done a very poor job at complying with their obligations under EU law there. The number of referrals already pending before the CJEU is testimony to all of this. But, even beyond that, several provisions of the DSM Directive are likely to produce a vertical direct effect. As such national courts could disapply incorrect national transpositions in the right circumstances. I am thinking of several parts of provisions like those contained in Articles 3, 4, 15, and 17.